Wednesday, October 5, 2011

In recent years, the U.S. Department of Energy has operated three loan-based programs designed to help finance innovative energy projects. One of these DOE loan guarantee programs backstopped a total of $16 billion in loans for 28 projects, ended last week. Projects supported by the loan program ranged from nuclear power to solar, wind to transmission,
biofuels to energy efficiency. Continued funding for the loan guarantee
program for 2011 was called into doubt in the spring of 2011, and Congress ultimately continued the program's stimulus funding only through September 30, 2011. While many of the projects financed through the program have drawn praise, the first guarantee issued -- $535 million in guarantees for solar panel maker Solyndra LLC -- has been called into question by some observers after Solyndra ceased operations last month.

On the DOE loan program's last day of operation, the Department of Energy finalized nearly $5 billion in loan guarantees to four solar projects. Three of the solar projects are located in California (as are a number of other large-scale solar projects funded through the DOE loan guarantees), while the fourth is an innovative rooftop solar project distributed across 750 existing rooftops owned and managed by Prologis in up to 28 states and the District of Columbia.

The hard deadline of last Friday means that other projects whose loan guarantee issuance process was nearly complete did not receive funding. Will these projects find another way to be financed and built? What impact will the end of the loan guarantee program have? Congress appears to have intended the shuttered program to be a short-term stimulus program to help get the ball rolling on project development. Because the projects financed through the program generally have long construction periods, it may be some time before we can have solid data on the value of the DOE loan guarantee program.

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